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This morning, I am recommending a bullish trade on EVERTEC, Inc. (NYSE:EVTC), the transaction processing company.
As I mentioned last Friday, my indicators are giving sell signals. The S&P 500 started to stall last week after coming up against its prior all-time high levels in the 2,940-2,950 range.
I think we will see a longer period of consolidation or even a pullback before the market breaks decisively higher and begins another leg up.
But there are two areas of the market that I think could still advance: energy and financials. This trade on EVTC gives us a good way to take on some bullish exposure to the latter.
Strong Banks are Good For EVTC
Financial stocks are showing bullish price action and have plenty of room to run. After falling sharply in mid-March, the financials have recovered thanks to some strong earnings reports from the big banks. They are still well off of last year’s highs, however, and could see further gains if the broader market holds up.
EVTC isn’t a bank, but it does serve different financial institutions (in addition to merchants, corporations and government agencies). If the financial sector is strong, EVTC will benefit.
That seems to be playing out in EVTC’s earnings. The company beat both revenue and earnings per share (EPS) expectations in its most recent report, according to Zacks.
Profit-Taking After Earnings
If we turn to EVTC’s daily chart, we see it dropped dramatically after reporting earnings. It’s not uncommon to see some profit taking after a strong earnings report, and the stock did manage to find some support near its old resistance level just under $30.
Daily Chart of EVERTEC, Inc. (EVTC) — Chart Source: TradingView
Because the fundamental picture looks good for EVTC, I think it could bounce back after last week’s drop. Now is a good time to take a position on the financial sector, and EVTC is an indirect way to do so. For that reason, I’m recommending a bullish call option on EVTC.
Buy to open the EVERTEC, Inc. (EVTC) June 21st $30.00 Calls (EVTC190621C00030000) at $1.10 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.